Goldman becomes one of the biggest bulls on Netflix, says earnings will blow past Street estimates

Published Thu, Apr 16 20208:47 AM EDTUpdated Thu, Apr 16 20204:02 PM EDT

(This story is for CNBC Pro subscribers only.) Netflix's stock has more room to run and is poised to get a boost by the streaming platform's blowout earnings next week, according to Goldman Sachs. The Wall Street firm hiked its 12-month price target on Netflix to $490 per share from $430 per share, implying nearly 15% upside from Tuesday's closing price of $426.75 per share. Goldman's new price target makes it tied on the Street for the highest forecast on Netflix, according to FactSet. Pivotal also has a $490 target price. The call sent shares of the streaming giant up more than 5% on Thursday to a new all-time intraday high. Netflix's stock closed up 2.9%. "As one of the few companies experiencing increased demand in the current environment, we expect shares will continue to outperform," Goldman Sachs equity analyst Health Terry said in a note to clients. Plus, Goldman said next week's earnings for Netflix are going to blow past expectations. Shares of Netflix have rallied more than 30% since it reported fourth quarter earnings in January, compared to the S & P 500's drop of 16% in the same period of time due to the coronavirus shutdown. Netflix is benefiting from the current stay-at-home environment due to the millions Americans quarantining at home, increasing their screen time. "Content additions to the platform, combined with the value of Netﬂix's library to those staying home during the COVID-19 crisis, drove this outperformance, more than offsetting the lingering impact of last year's price increase and growing competition in SVOD," said Terry. "More importantly, we believe the COVID-19 crisis is accelerating the shift from traditional content viewership (linear TV, theaters, etc) to streaming services." Netflix reports its first quarter earnings on Monday and Goldman is expecting a huge beat, which contrasts this week's earnings season which showed the economic fallout of the virus is denting corporate profits. "We expect Netﬂix to report 1Q results well above guidance, with over 10mn net subscriber additions, and provide initial guidance for 2Q ahead of FactSet Consensus," said Terry. Goldman believes Netflix will report 10.3 million total paid subscribers in the first quarter, well ahead of guidance of 7 million and consensus of 7.8 million. Goldman's previous subscriber estimate was 8.3 million. "We expect 10.3mn total paid net subscriber additions, ahead of guidance, driven by what we view as a strong content slate which included ﬁlms such as The Platform and To All the Boys: P.S. I Still Love You, as well as shows such as Tiger King, Chilling Adventures of Sabrina (Season 2), Formula 1 (Season 2), Altered Carbon (Season 2), Ozark (Season 3), and Narcos (Season 2)," said Terry. The firm is expecting earnings per share of $1.69, above consensus of $1.63, according to FactSet. Shares of Netflix have rallied more than 30% in 2020. — with reporting from CNBC's Michael Bloom.

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Netflix's stock has more room to run and is poised to get a boost by the streaming platform's blowout earnings next week, according to Goldman Sachs.